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Thursday, August 25, 2011

Oh, So This Is Why KC Sports Fans Hate Tim Leiweke...

Much of the fallout from the Islanders' failed arena plan has focused on what happens next (read: where will the Islanders go now)? The Village Voice in New York tackles this question, citing a 2009 article in KC's Pitch.

From the Voice:

Kansas City has a new arena, but as our K.C. sister publication the Pitch revealed, it's not likely to throw a sweetheart lease deal at a hockey team. That's because AEG, the management company that runs the publicly owned Sprint Center, would have to give up "a very sizable chunk of the arena revenues" to lure an NHL (or NBA) club, K.C. budget director Troy Schulte told the Pitch, making a full year of concerts sound great by comparison.

Despite the age of the article, it is still relevant today. Why in 2011, when the Sprint Center has established itself as a profitable arena, would AEG offer a Penguins-esque offer circa 2007 to an NHL team. Then, the arena was just a NEW arena with HOPES of getting a tenant of some sort. What many sports fans in Kansas City are slowly beginning to realize is that AEG isn't just going to lure a team out of the goodness of their heart anymore. It's all business, baby!

Leiweke doesn't owe us anything, but in our eyes he does. Look at Mellinger's articles. To his credit, he speaks as a KC sports fan. He also wants to cover another team (job security), but it's also easy to root for him to expose AEG for its KC lethargy. I must kind of agree with Chris Suellentrop's poor assessment of Kansas City that even he disagrees with, but KC does have a step-child mentality, a history of striving to be the 'big' city while denying much of what still holds it back from that distinction in the eyes of the rest of the USA (i.e. "Cow Town," even though the city was built from the stockyards out). We're cultured ("Sophisticated-- God, we're sophisticated!") folks here in the Midwest, but the biggest putdown from outsiders is that we're a bunch of slack jawed farmers...and for some reason we hate to be seen as inferior (ed. note: in my experience farmers are good people, so no putdown here). So, AEG's want to make the most money in this instance is seen by Kansas Citians as KC being too small of a market (thus, inferior to say...Columbus, Nashville, or St. Louis). Instead, AEG is just happy to make the money they are making from an arena that maybe, just possibly was not supposed to make this much money off of concerts. And the bitch of the whole thing; Kansas Citians deep down assumed it wouldn't be this profitable, but they still want a team. Concerts don't put you on the map (or make you a 'travel destination' which is a term going around a lot these days), sports do.

This doesn't absolve Leiweke for his failed promises and a lack of effort to bring a team, but it certainly explains the city sports fans' growing impatience with anything new to report about an NHL or NBA team looking at the Sprint Center since about 2008. KC is a good place, maybe not a 'hockey town' (yet), but its downtown business owners should be getting a better story from those that control the entertainment that comes to their district. No, AEG does not owe them anything, but someone deserves an explanation, dag nabbit.

I also mentioned a blog post by Field of Schemes author Neil deMause, who tracks public money being spent for professional sports franchises. In clarifying the $1.8 million in profits that AEG was kicking back to the city, deMause wrote that the money was "operational profit -- in other words, it doesn't count the cost of paying for the building it in the first place."
Understanding the funding for the Sprint Center can be confusing. For a refresher, I called Shani Tate, communications director for the Sprint Center. She walked me through the basics:
The building cost $276 million. AEG put up $54 million in cash. The NABC put up $10 million. The city is financing the rest through taxes on hotel rooms and rental cars. And the city is taking is taking in more from the hotel/rental car tax than expected.
DeMause guessed the city was paying between $10-$15 million a year in arena bond payments, adding "there's almost no way it [the city] will actually turn a profit on building the Sprint Center."
His guess was close.
"We pay an annual debt service projected this year of about $13.8 million," said Troy Schulte, Kansas City's budget director.
Schulte says the hotel and car rental fees have "exceeded projections over the last couple years every year." For example, last year the city projected $8.9 million in arena fees. They actually received $9.3 million. As far as the $1.8 million operating profit, Schulte says that comes after AEG takes its 16 percent cut and then the city and AEG split the money going forward.
"As long as that continues to generate activity like it has been, it'll be profitable for AEG to operate," Shculte says.
Schulte knows that it'll be tougher as the building loses its shine and if the economy doesn't improve. And should AEG finally find an anchor tenant, that sports franchise would take "a very sizable chunk of the arena revenues."
"Obviously an anchor tenant would have an effect as far as pulling down the available revenues because a lot of those revenues would then go to an anchor tenant," Schulte says.
Right now, it's more profitable for the Kansas City and AEG to book concerts. But as the newness wears off, the stability of having 41 guaranteed dates a year will become more and more important.